Regulatory Changes and Their Impact on Semiconductor Mergers and Acquisitions

Recent Regulatory Changes Affecting Semiconductor M&A

Recent regulatory changes, including the CHIPS Act and heightened due diligence requirements, are reshaping the semiconductor M&A landscape. Companies like Texas Instruments and Qualcomm emphasize the need for compliance to mitigate risks, while investments in manufacturing are seen as vital for national security and supply chain resilience.

"We are not requesting 100% traceability or diversion prevention. Yet peers in the semiconductor and broader tech field have agreed to take necessary steps to address the risks raised by this proposal.As long term shareowners, we are asking the company to commission a 3rd party report to better assess the escalating legal, regulatory and reputational risks by conducting heightened human rights and know your customer due diligence processes in Russia and Ukraine and across conflict affected and high risk areas to assess if products are misused in violation of international law. We therefore urge the shareholders to vote for its passage. Thank you." --- (TXN, event transcript, 2024/04/25)

"I'm sure you've read that book, Mark, as I have. And so, lots of conversation around supply chain and the need to source high end semiconductors from Taiwan and within the China sphere of influence, and what the CHIPS Act is going to do to help that or change that, and I don't know, as you and Lisa and the team at AMD think about these things, maybe give us a couple of bullet points as to what are your top priorities as CTO?" --- (AMD, conference, 2024/05/29)

""As we continue to build a globally resilient semiconductor supply chain and create the world's first systems foundry for the AI era, Naga's leadership will help us to accelerate our progress and capitalize on the significant long-term growth opportunities ahead."" --- (INTC, press release, 2024/07/25)

"For example, if any key supplier of technologies and intellectual property to the semiconductor industry was sold to one of our competitors, it could negatively affect our ability to procure or license such technologies and intellectual property in the future, at all or upon acceptable terms, which could have wide-ranging impacts on our business and operations." --- (QCOM, sec filing, 2024/Q1)

""By investing in semiconductor manufacturing, we are helping secure this vulnerable supply chain, boosting our national security and global competitiveness, and creating new jobs for Texans," said U.S. Sen. John Cornyn." --- (TXN, press release, 2024/08/16)

Impact of Regulations on Specific Semiconductor Mergers

Regulatory changes significantly impact semiconductor mergers and acquisitions. Nvidia highlights potential export restrictions affecting financial results, while Texas Instruments' funding agreement with the U.S. Department of Commerce aims to enhance capacity. Broadcom notes scaling challenges due to regulatory shifts, underscoring the complex interplay between regulations and M&A strategies in the sector.

"Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results." --- (NVDA, sec filing, 2025/Q1)

"Before we get started, you may have seen that on Friday, we announced that we have signed a preliminary agreement with the U. S. Department of Commerce for up to $1,600,000,000 in proposed direct funding under the Chiefs and Science Act. This proposed funding coupled with an estimated $6,000,000,000 to $8,000,000,000 in investment tax credit will help TI provide geopolitically dependable capacity for our analog and embedded processing semiconductors." --- (TXN, event transcript, 2024/08/20)

"scaling challenges when our company faced an unexpected surge in access due to government regulation changes in 2023." --- (AVGO, press release, 2024/08/27)

"According to the Board of Directors' statement next to this proposal, the only reason to maintain the present 7 pronged 67 7% shareholder approval requirements is to avoid a situation that is highly unlikely to incur." --- (NVDA, event transcript, 2024/06/26)

Role of Government Agencies in M&A Oversight

Government agencies play a crucial role in semiconductor M&A oversight by providing incentives for a resilient supply chain and ensuring transparency through lobbying and disclosure. Their involvement is essential for maintaining a competitive landscape and facilitating strategic partnerships within the industry.

"I’m grateful for the support of the Polish government and looking forward to the many opportunities ahead as we continue our work together." --- (INTC, Twitter, 2024/07/02)

"In 2021, the Government Accountability Office found 19 of 24 United States government agencies surveyed were using facial recognition." --- (AMZN, event transcript, 2024/05/22)

"In addition to SCIP, other elements of Smart Capital include: 1) government incentives to provide a level playing field for building a geographically diverse and resilient semiconductor supply chain; 2) build-out of shell space, which gives the company the flexibility to determine how and when to bring additional capacity online; 3) customer participation in internal capacity build-outs as Intel executes its foundry strategy; and 4) strategic and opportunistic use of external foundries." --- (INTC, press release, 2024/06/04)

"What is disclosed is managed. Full disclosure of Amazon's lobbying will ensure proper oversight of our company's actions." --- (AMZN, event transcript, 2024/05/22)

Market Reactions to Regulatory Changes

Market reactions to regulatory changes in the semiconductor sector indicate a cautious outlook. Qualcomm highlights that compliance and regulatory shifts could adversely impact operations, yet they also see positive trends in premium segments despite overall market stagnation, suggesting adaptive strategies in response to these changes.

"Foundry at fair market prices. This quarter represents another important step in our transformation with increased transparency and accountability across all layers of the organization, which is already having a positive impact on decision-making, efficiencies and financial discipline." --- (INTC, earning call, 2024/Q1)

"Compliance with, or changes in the interpretation of, existing Regulations, the adoption of new Regulations, changes in the oversight of our activities by governments or standards bodies, or rulings in court, regulatory, administrative or other proceedings relating to such Regulations, among others, could have an adverse effect on our business and results of operations." --- (QCOM, sec filing, 2024/Q3)

"So the market is not growing. But within that, the premium tier, the trend has been very positive." --- (QCOM, earning call, 2024/Q1)

"We're going to see the market transition over with or without Qualcomm and obviously our assumption and our claim is that it's going to happen because of Qualcomm." --- (QCOM, conference, 2024/08/29)

"What we see now is a stable. But there's one thing that is positive. Mix continues to improve and it's been reflected in our numbers, which means in a market that does not grow, we have been growing content and we see a mix improvement, especially towards the high and the premium tier." --- (QCOM, conference, 2024/05/29)

Strategic Responses from Semiconductor Companies

Semiconductor companies are strategically responding to regulatory changes by forming partnerships and seeking acquisitions. For instance, AMD is actively looking for a partner to enhance its manufacturing capabilities, while Texas Instruments aims to secure supply chains through government investments, reflecting a proactive approach to navigate the evolving landscape.

""We are honored to be a strategic partner with AMD, a global leader in high-performance computing and AI semiconductor solutions," said Kim Wontaek, Executive Vice President of the Strategic Marketing Center at Samsung Electro-Mechanics." --- (AMD, press release, 2024/07/22)

"And we feel very confident that the secular trend around compute growth, right, getting to $1,000,000,000,000 if you will in semiconductors, foundry growth and the need for leading node capacity for most of the fabless companies and also the need for geopolitical geo diverse capacity for resilience is a trend that creates has huge amount of headroom for shareholder value creation that if we execute, we can be we can reward our investors with." --- (INTC, conference, 2024/06/12)

"So we're very pleased with that. We're able to satisfy that, especially due to the strategic partners we have helping us with this." --- (AVGO, conference, 2024/09/11)

""With this proposed investment from the Biden-Harris Administration in TI, a global leader of production for current-generation and mature-node chips, we would help secure the supply chain for these foundational semiconductors that are used in every sector of the U.S. economy, and create tens of thousands of jobs in Texas and Utah," said U.S. Secretary of Commerce Gina Raimondo." --- (TXN, press release, 2024/08/16)

"unknown: Yes, I'll just add one thing. So we will be seeking a strategic partner to acquire this manufacturing business." --- (AMD, event transcript, 2024/08/19)